Irene's Destruction Will Be Good for the Economy
Everybody expected Hurricane Irene to be a multi-billion dollar disaster, and it was. On the low end of estimates, the Consumer Federation of American says that property damage caused by wind will cost about $5 billion and flooding a further $2 billion. Standard & Poors builds on that number estimating that property damage will total about $7 billion but the total economic impact of the disaster will be closer to $20 billion. "I think that it's going to be a near term hit to August. However, we think that there's going to be a lot of rebuilding after this," says S&P senior economist Beth Ann Bovino. "It's going to give a little bit of the boost to the fourth quarter."
RELATED: Hurricane Irene Is Growing Stronger
"After a disaster, there's always a definite short-term increase," Mark Merritt, president of the crisis-management consulting firm Witt Associates, similarly told Politico. "There will be furniture bought, homes repaired, new carpet, new flooring, all the things affected by flooding."
RELATED: Who Profited from Irene? The Weather Channel
Nate Silver at The New York Times crunched some numbers last week and estimated that a storm of Irene's size could cost New York City alone $2.2 billion. The low end of his final estimate for damages hovers between the above two estimates at $14 billion, but he says that even if winds were just a little bit stronger, the economic impact could've been much much worse:
Imagine, for instance, if Irene had been about 20 percent stronger when it hit New York--that it had wind speeds of about 90 miles an hour instead of 75 miles an hour. That doesn’t sound like a huge difference and from a meteorological perspective, and it isn’t.
But from an economic perspective, that may have mattered quite a lot. Some of the scholarly literature suggests that the economic damage resulting from hurricanes is a function of wind speeds raised to the eighth power. I'll spare you the math: what that means is that hurricane with wind speeds of 90 miles an hour might be as much a 4 or 5 times more destructive as one with wind speeds of 75 miles per hour. So if Irene had been just a bit stronger, we might be talking about economic losses on the order of $55 billion to $70 billion, rather than a "mere" $14 billion.
By Silver's estimates, the total impact of Irene matches the hype--despite what some media critics would like to believe.
